Review

• Excluding the one-off gain from exceptional items, GAMUDA’s 9MFY24 core net profit of RM613.3mn came in at 66.3% and 62.4% of ours and the consensus’ full-year estimates, respectively. We deemed the results within our expectations as we expect a stronger earnings performance in 4QFY24, driven by higher sales in the property segment.

• A second interim dividend of 10.0sen was declared, bringing the total dividend for FY24 to 16.0sen (vs 50.0sen in 9MFY23).

• YoY, 9MFY24 revenue surged by 79.1% to RM8,625.5mn, primarily driven by robust growth in the construction segment, thanks to higher contributions from overseas projects. However, this strong growth was partly offset by a decline in the property segment, which saw lower sales contributions due to the launch of only four new projects in 3QFY24. Despite the substantial revenue increase, PBT slid marginally by 1% to RM748.2mn. This decline was due to an 8.1% decrease in the construction segment, attributed to the completion of domestic projects, which offset the 21.5% growth in the property segment.

• QoQ, 3QFY24 revenue declined 25.2%, primarily due to a significantly low contribution from the property segment owing to the same reason mentioned above. However, the PBT grew 12.2% to RM268.9mn, supported by resilient earnings in the construction segment and contributions from overseas property projects. Briefing highlights Construction

• GAMUDA’s unbilled construction order book stands at RM24.2bn, equivalent to 4.1x FY23 construction revenue, providing robust earnings visibility up to FY28.

• GAMUDA is confident that the group will achieve its FY24-25F new job wins target of RM25bn by the end-CY24 and is set to surpass the RM30bn outstanding order book by the end-CY24. We believe this is largely driven by the potential rollout of the Penang LRT, which is expected to be finalised by 4QCY24, and an increase in the number of data centre projects winning.

• Additionally, management has projected a CAGR of 20% in revenue from FY24 to FY28, aiming to increase revenue from RM15bn to RM30bn. This growth is expected to be driven by strong performance in both the construction and property divisions, with a significant contribution from overseas projects.

• Management expects the construction margin, which is at the bottom now, to improve, supported by improving net margin contributions from overseas projects (increasing from 3.3% in 9MFY23 to 3.6% in 9MFY24) and better margins secured by newly bagged projects. Property Development

• GAMUDA's property division remains optimistic about achieving its target sales of RM5bn for FY24. As of 9MFY24, the company has achieved RM2.3bn in sales. This confidence is bolstered by the 100% take-up rate of Eaton Park in Ho Chi Minh City (GDV of RM4.9bn) and the upcoming launch of Gardens Park in mid-CY24 (GDV of RM4.0bn), among other projects. Consistent with previous years' trends, the property division’s sales tend to peak in the fourth quarter of the financial year.

• As of the end of April 2024, the unbilled property sales stood at RM6.7bn.

Impact

• Post-result briefing, we raised our new job replenishment assumption to RM20bn from RM15bn for FY25. We also adjust our progress billing assumptions for the construction and property projects to reflect the changes in revenue recognition timing. As a result, our FY24/25/26F earnings outlook revised upward by 3.0%/12.3%/22.1%, respectively.

Outlook

• We maintain a positive outlook on the group's potential for substantial earnings growth in 4QFY24, building on the performance seen in 9MFY24. This optimism is supported by the group's robust outstanding order book and a strong backlog of unbilled property sales, which are expected to drive significant revenue and profit increases in the final quarter.

Valuation

• Following the earnings revision, we raise our SOP-derived target price to RM8.13 from RM6.18. Maintain Buy on the stock.

Source: TA Research - 26 Jun 2024